Citing sources at the bank, the Cyprus News Agency said the negative-interest rate policy will apply only to corporate depositors, not to accounts held by individuals.

A source said there were no plans to likewise charge individuals for their deposits.

No interest will be charged on credit balances of up to €100,000 for current accounts and overdraft accounts.

Current accounts with a balance of €100,000 and above will be charged 0.60 per cent. This applies to current accounts, overdraft accounts as well as savings accounts and notice accounts of seven days to 12 months.

The negative interest rate will be calculated according to the daily balance, while the accrued interest will be counted towards the available balance until it is capitalised, which will occur twice a year, on June 30 and December 31.

Hellenic has informed customers they can terminate their accounts without any charge, if they do so by February 28.

Bank sources told the Cyprus News Agency CNA they figure the Negative Interest Rate Policy (Nirp) will recoup about half the amount that the lender itself is charged for ‘parking’ its excess liquidity with the European Central Bank (ECB).

They said the ECB charges Hellenic approximately €16 million a year for the latter depositing its excess liquidity with the former. The €16 million number applies to Hellenic’s deposits after it acquired the ‘good part’ of the Cyprus Cooperative Bank.

Hellenic is reportedly in the process of formulating an investment package with Allianz, which will be available to customers wishing to offset the impact of negative interest rates on their deposits.

The ECB introduced Nirp in June 2014, initially charging commercial banks 0.1 per cent on deposits. It subsequently changed the rate to negative 0.4 per cent, and most recently to negative 0.5 per cent.

The thinking behind policies such as Nirp was to encourage banks to lend out their excess liquidity, in a bid to stimulate borrowing and thus economic activity in the wake of the 2007-2008 global financial meltdown.

Along with Nirp, the ECB introduced quantitative easing, which has seen the ECB’s balance sheet balloon to over €5 trillion.

The ‘extraordinary’ monetary policies adopted have been criticised for creating more debt and for sending wrong signals to investors on when to save and when to spend.

Source: Cyprus Mail